The two companies plan to combine international networks, traffic and products to compete more successfully in the international calls market.

Their 50:50 joint venture does not involve any share swap. It is aimed at providing information services to large companies across national borders.

The transatlantic phone alliance could be in for a battering

The Commission wants to find out whether such a link-up of the two telecoms giants could lead to a transatlantic monopoly of telephone services. BT is the UK's largest telephone company and AT&T is the United States' largest long-distance carrier.

The decision to hold the inquiry follows a complaint by BT's rivals in the UK against the proposed joint venture. They fear that the two companies could capture the market providing telecommunications services for multi-nationals.

The EU investigation will last up to four months, but officials have already indicated they may not have enough evidence of unfair competition to prevent the alliance.